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2023 a 'Transition Year' for Abbott as Full-Year Non-COVID Revenues Rise 12 Percent


NEW YORK — Abbott sees 2023 as a transition year, with lower-than-expected COVID-19 testing sales ushering in a full return to its base business and an emphasis on new products, company executives said on a conference call to discuss the firm's financial quarterly results on Wednesday morning.

The COVID-19 pandemic disrupted Abbott's trajectory, as COVID-19 testing "temporarily altered our identity" and became the main point of focus for the general public and investors. However, the firm "knew that the pandemic would not last forever," Abbott CEO Robert Ford said, and when the firm was flush with COVID-19 cash, investments accelerated in several areas with the knowledge that it would scale those investments back down when COVID-19 testing demand declined, he added.

"The experiences we gained in creating the COVID testing business and then managing the rapid scale-up and subsequent scale-down of that business will have a lasting positive impact on our company," Ford said. Reinvesting in the base business with its COVID-19 testing revenue and strengthening its segments' positions in their respective markets "was absolutely the right strategy," he added.

One area it targeted for accelerated investment was the research and development pipeline, and the firm has seen that investment pay off, according to Ford. All four of the company's business segments have seen a mix of new products targeting new indications, and geographic and reimbursement expansions. In diagnostics, the firm saw approvals of new tests, new instrument launches, and the regulatory approval of its laboratory automation system, he said.

These new opportunities across the company "contributed to an acceleration in our growth" in 2023 and led Abbott to exceed the expectations it set forth at the beginning of the year, Ford said.

While larger M&A deals may be another area of investment, the firm has the ability to be selective because it has a strong balance sheet that provides "a lot of flexibility on our capital allocation plan" and a "great pipeline" with "great organic opportunities to be able to drive top-tier, sustainable growth," Ford said.

"We're not trying to use M&A as a way to bulk up our top line or to cover any top-line gaps," he said. "If there are opportunities that fit strategically and can generate an attractive return, then … we've got the flexibility and fire power to do that, but I'm not looking to acquire businesses simply to make the top line look good."

The firm has exited the pandemic "in an even stronger position" than it started, and its pipeline is "generating a lot of new opportunities for growth," he added. Abbott is "clearly entering 2024 with a lot of momentum."

"Our performance here has now transitioned from being driven by COVID testing to once again driven by broad-based strength across the entire company," he said.

For the three months ended Dec. 31, 2023, the Abbott Park, Illinois-based firm reported overall revenues of $10.24 billion, up nearly 2 percent from $10.09 billion a year ago and beating the consensus Wall Street estimate of $10.18 billion. On an organic basis, which excludes the impact of foreign currency exchange, revenues rose 2 percent year over year.

Excluding COVID-19 testing-related sales, revenues rose 11 percent on an organic basis for 2023, Abbott said.

The company said revenues from its diagnostics business declined 23 percent from the prior-year quarter to $2.53 billion from $3.31 billion but rose 2 percent when excluding COVID-19 testing-related sales. Within diagnostics, core laboratory revenues increased 8 percent year over year to $1.37 billion from $1.26 billion; molecular revenues declined 15 percent to $153 million from $180 million; point-of-care revenues climbed 14 percent to $149 million from $131 million; and rapid diagnostics revenues were $862 million, down 49 percent from $1.73 billion in the prior-year quarter.

Global COVID-19 testing-related sales were $288 million in the recently completed quarter, compared to $1.07 billion in Q4 2022. Excluding COVID-19 testing-related sales, core laboratory revenues were up 10 percent, molecular revenues rose 2 percent, point-of-care revenues increased 13 percent, and rapid diagnostics revenues declined 14 percent, all on an organic basis, Abbott said.

Ford noted on the conference call that the rapid diagnostics business was impacted by seasonality in the fourth quarter, as the influenza season arrived later than in Q4 2022, leading to lower sales of respiratory testing.

Core laboratory revenue growth, however, was driven by uptake of the Alinity systems, which "drive high contract renewal rates and competitive win rates," Ford said. The firm has recently secured multiple large accounts globally, and the rapid diagnostics business has seen placements for "a lot of new instruments out there for decentralized testing." Abbott is making further investments on new assays to add to those instruments, Ford noted.

Abbott's nutrition revenues increased 12 percent year over year in Q4 2023 to $2.04 billion from $1.82 billion; established pharmaceuticals revenues were flat at $1.22 billion; and medical devices revenues rose nearly 18 percent to $4.44 billion.

Abbott reported net earnings of $1.59 billion, or $.91 per share, in Q4 2023 compared to $1.03 billion, or $.59 per share, in the year-ago period. Adjusted EPS for the recently completed quarter was $1.19, meeting the consensus Wall Street estimate.

For full-year 2023, the firm reported total revenues of $40.11 billion, down 8 percent from $43.65 billion a year ago, beating the average Wall Street estimate of $40.07 billion. On an organic basis, total revenues were down 6 percent, but excluding COVID-19 testing-related sales, the firm's revenues rose nearly 12 percent.

Abbott reported $9.99 billion in diagnostics revenues in 2023, down 39 percent on a reported basis from $16.58 billion in 2022 and down 38 percent on an organic basis. Excluding COVID-19 testing-related sales, the firm's diagnostic revenues rose 6 percent.

Within diagnostics, molecular diagnostics revenues totaled $574 million in 2023, down 42 percent from $995 million in 2022. Core laboratory revenues were $5.16 billion, up 5 percent from $4.89 billion in 2022. Point-of-care revenues were $565 million, rising nearly 8 percent from $525 million a year ago, and rapid diagnostics revenues were $3.69 billion, down 63 percent from $10.18 billion in 2022.

Global COVID-19 testing sales for the year were $1.59 billion, down from $8.37 billion in 2022. Excluding COVID-19 testing-related sales, molecular revenues declined 8 percent, core laboratory revenues rose 9 percent, point-of-care revenues were up 8 percent, and rapid diagnostics revenues grew 1 percent year over year, all on an organic basis.

Regarding its other business units, 2023 nutrition revenues rose 9 percent year over year to $8.15 billion from $7.46 billion; established pharmaceuticals revenues increased 3 percent to $5.07 billion from $4.91 billion; and medical devices revenues rose 14 percent to $16.89 billion from $14.69 billion.

The company reported a 2023 net income of $5.72 billion, or $3.26 per share, compared to $6.93 billion, or $3.91 per share, in 2022. The firm's 2023 adjusted EPS was $4.44 per share, meeting the consensus Wall Street estimate. The adjusted EPS was above the midpoint of Abbott's original guidance range despite COVID-19 testing sales "coming in much lower than originally forecasted," Ford said.

Abbott is projecting full-year 2024 EPS of between $3.20 and $3.40 and base business sales growth — excluding COVID-19 testing-related sales — of between 8 percent and 10 percent. Adjusted EPS growth is expected to be between $4.50 and $4.70. CFO Phil Boudreau said on the firm's conference call that the company expects adjusted EPS of between $.93 and $.97 for the first quarter of 2024.

Ford added that although there is "a lot of volatility in the world," he believes the predicted EPS and revenue growth ranges capture "the opportunity that we have on the earnings side" and noted that there is "probably more upside than downside in that range."